Business Context and Reporting Period
The submitted Form 10-Q is for Experience Investment Corp., not Strata Critical Medical, Inc.; investors should verify the issuer identity. The report covers the quarter and nine months ended September 30, 2020, with financial statements unaudited.
Experience Investment Corp. is a Delaware blank-check company formed on May 24, 2019 to pursue a business combination, with an intended focus on the travel and leisure industry. It had not commenced operating activities or generated operating revenue as of September 30, 2020.
Financial Results and Position
| Metric | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 |
|---|---|---|
| Operating costs | $160,688 | $421,374 |
| Trust-account interest income | $33,909 | $1,011,163 |
| Net income/(loss) | $(100,155) | $465,934 |
| Basic and diluted income/(loss) per share | $(0.01) | $(0.03) |
| Net cash used in operating activities | Not separately reported for the quarter | $(416,060) |
- Revenue: No operating revenue; income consisted primarily of interest earned on Trust Account investments.
- Liquidity: Cash outside the Trust Account was $889,548 at September 30, 2020, compared with $1,305,608 at December 31, 2019.
- Restricted funds: Marketable securities in the Trust Account totaled $277.3 million, compared with $276.3 million at December 31, 2019.
- Total assets were $278.2 million; total liabilities were $10.1 million; and stockholders’ equity was $5.0 million.
- Debt: The filing reports no long-term debt. A $9.625 million deferred underwriting fee is payable only if a business combination is completed.
- Redeemable shares: Class A common stock subject to possible redemption was recorded at $263.2 million, representing 26,141,235 shares.
- Cash flow was primarily affected by operating expenses and the non-cash treatment of Trust Account interest income.
Material Changes Versus Prior Comparable Period
- Third-quarter results changed from net income of $99,139 in 2019 to a net loss of $100,155 in 2020, as operating costs increased to $160,688 from $43,053 while Trust Account interest income declined to $33,909 from $168,280.
- For the nine-month period, the Company reported net income of $465,934 versus $98,139 for the period from inception through September 30, 2019. The comparison is not fully comparable because the 2019 period began on May 24, 2019.
- Operating cash use increased to $416,060 for the first nine months of 2020 from $1,297 for the 2019 inception period.
- Trust Account securities increased by approximately $1.0 million, reflecting accumulated interest.
- Cash available outside the Trust Account declined by approximately $416,000 during the first nine months of 2020.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- No earnings or operating guidance was provided. Management expects no operating revenue until after completion of a business combination.
- The Company had until September 17, 2021 to complete a business combination. If unsuccessful, it must cease operations, redeem the public shares using Trust Account funds, and liquidate.
- Public stockholders may redeem their shares for a pro rata portion of the Trust Account upon completion of a business combination or liquidation, subject to the stated terms.
- The Company must generally acquire a target with an aggregate fair market value of at least 80% of Trust Account assets and maintain at least $5,000,001 of net tangible assets at closing.
- Additional financing may be required to complete a transaction or fund redemptions. New equity or debt could dilute existing holders or increase financial risk.
- Public and private warrants could result in future dilution. If no business combination is completed, the warrants expire worthless.
- The filing identifies a risk that negative interest rates could reduce the per-share redemption amount below $10.00.
- The Sponsor agreed to limited protection of the Trust Account against certain third-party claims, but that protection may not cover all claims.
- No legal proceedings, material subsequent events, or material changes in internal control were reported. Management concluded disclosure controls were effective.
Important Facts for Investors to Verify
- Confirm that this filing belongs to Experience Investment Corp. and reconcile it with the requested company, Strata Critical Medical, Inc.
- Verify the status of the proposed business combination and whether the September 17, 2021 deadline was subsequently extended or otherwise modified.
- Review the amount and terms of the $9.625 million deferred underwriting fee and its effect on funds available for a transaction or redemption.
- Assess the redemption value and the number of public shares subject to redemption, including the effect of Trust Account interest, taxes, and transaction expenses.
- Review potential dilution from 6,875,000 Founder Shares, public warrants, private placement warrants, and any future financing.
- Confirm the sufficiency of the $889,548 held outside the Trust Account to fund expenses before a business combination.